Gold surges to new peak on safe-haven demand, Fed rate cut bets

Gold prices climbed to a fresh record high on Tuesday, aided by safe haven flows amid geopolitical uncertainty and expectations of further Federal Reserve rate cuts.

Spot gold rose 0.8% to USD 3,777.80 per ounce as of 01:45 p.m. ET (1745 GMT), after hitting a fresh record high of USD 3,790.82 earlier in the session.

US gold futures for December delivery settled 1.1% higher at USD 3,815.7.

The benchmark 10-year Treasury yields fell 0.2%, while the US dollar was largely steady.

Fed Chair Jerome Powell said the central bank faces a “challenging situation” with ongoing risks of faster-than-expected inflation while weak job growth raises concerns about labor market health.He offered little clarity on when the Fed might next cut interest rates.

“The gold market recognized that there was nothing significant in his speech compared to the tone set last week, nothing significant enough to change the upside path in gold,” said RJO Futures market strategist Bob Haberkorn.

Traders still expect US rate cuts in October and December after the Fed reduced rates by 25 basis points earlier this month.

Attention now shifts to Friday’s release of the US Personal Consumption Expenditures (PCE) index, the Fed’s preferred measure of inflation.

Meanwhile, NATO warned Russia that it would use “all necessary military and non-military tools” to defend itself as it condemned Moscow for violating Estonian airspace in “a pattern of increasingly irresponsible behaviour”.

Strong buying interest from ETF investors – driven by expectations of rate cuts, concerns around the Fed’s independence and geopolitical developments – are also likely giving gold prices a boost, Commerzbank said in a note.

The People’s Bank of China is leveraging the Shanghai Gold Exchange to encourage central banks from friendly nations to purchase and store bullion within its borders, Bloomberg reported on Tuesday, citing people familiar with the matter.

Spot silver rose 0.2% to USD 44.17 per ounce, hovering near a 14-year high. Meanwhile, Platinum rose 4.5% to USD 1,480.97, its highest level since 2014 and palladium rose 2.8% to USD 1,212.

(Reporting by Noel John in Bengaluru; Editing by Leroy Leo and Tasim Zahid)